World Bank Group Releases New Data to Boost Investment in Emerging Markets

Ndubuisi Francis in Abuja

The World Bank Group (WBG) yesterday made good its promise to publish more of its proprietary data, including those on debt defaults as part of a push to attract more private sector investment to developing countries.
The bank which had on Sunday made the promise, yesterday published sought-after proprietary statistics that reveal the credit risk profile of private and public sector investments in emerging markets.

Making this data publicly available is the latest in a concerted effort to drive more private sector investment to emerging and developing economies.
Two separate reports are being provided for the first time ever.
The International Bank for Reconstruction and Development (IBRD), a member of the World Bank Group is sharing sovereign default and recovery rate statistics dating back to 1985.

This information will help credit rating agencies and private investors gain a deeper understanding of IBRD’s credit risk.
At the same time, the International Finance Corporation (IFC) is providing private sector default statistics broken down by internal credit rating.
The report provides insights that could help private sector investors feel more confident about investing in emerging markets.
In his remarks, World Bank Group President Ajay Banga, said: “We believe our proprietary information should be a global public good and sharing it will provide transparency and inspire investor confidence.

“The publication of this data is aimed at one goal: getting more private sector capital into developing economies to drive impact and create jobs.”
The WBG President had early Sunday revealed that the World Bank Group had mobilised $41 billion of private capital for emerging markets and raised another $42 billion from the private sector for bond issuance last year, with both totals to be eclipsed this year.

The World Bank Group analyses complement statistics produced by the Global Emerging Markets Risk Database Consortium (GEMs), a group of 25 multilateral development banks and development finance institutions that pools similar data and publishes them as a combined resource for public use.
The consortium releases sovereign and private sector default statistics annually. Earlier this week, the consortium expanded the materials they publish to include private sector recovery rates disaggregated by country income, regions, and sectors.

To ensure the quality of the information, IBRD staff spent more than a year recovering and cleaning sovereign default data covering the period 1985 to 2023. These statistics are unique to IBRD due to its global portfolio and long historical record.
Similarly, IFC’s private sector default statistics have been compiled over nearly 40 years and published as a standalone report to respond to the urgent need of investors for emerging market insights. In time, these statistics might also be combined with other data from development institutions and published through the GEMS Consortium.

The IFC’s private sector portfolio had a low default rate of 4.1 per cent from 1986 to 2023, suggesting the untapped potential and resilience of private sector investments in emerging markets.
For investments rated as “weak” by IFC’s internal rating system, the default rate was only 2.6  per cent during the period between 2017 and 2023, indicating that even investments considered higher risk can perform better than could be expected.

For sovereign borrowers, defaults are rare, averaging just 0.7 per cent annually, and the World Bank typically recovers more than 90
 per cent of the amount owed, including both principal and interest. This underscores the World Bank’s preferred creditor status and its ability to effectively manage sovereign credit risk.

Sovereign default losses range from 0.01 per cent to 58.5 per cent, reflecting the effect of interest rates and length of time in default.

The World Bank Group’s comprehensive data can inform more nuanced risk assessments, leading to better investment decisions and improved access to capital for emerging markets.

 This new reporting will support private investment in developing economies – by increasing transparency on historical performance, helping investors gauge risk-reward premiums, and bolstering confidence on the state of emerging markets.